SB 1147 - This act regulates high-cost home loans. A high- cost home loan is a home loan that exceeds a certain interest rate or a certain amount of total points and fees.

The act prohibits prepayment fees or penalties and prohibits lenders from financing certain insurance premiums, debt cancellations and suspension fees. A lender cannot knowingly make a home loan to a borrower that refinances an existing home loan unless the borrower receives some net benefit from the new loan. A lender cannot encourage default on an existing loan in order to close on a new home loan that refinances the existing loan.

High-cost home loans cannot contain accelerator clauses except under limited circumstances. The act prohibits practices related to repayment schedules, increases in interest rates after default on a high-cost home loan and consolidation of periodic payments paid from loan proceeds.

A lender cannot charge fees to a borrower to change provisions of a high-cost home loan or to defer payment on such a loan. Mandatory arbitration clauses that limit a borrower's ability to seek judicial relief are prohibited.

Before a high-cost home loan can be made, the lender must certify that the borrower has received approved counseling about the advisability and appropriateness of the loan.

The act provides that a lender cannot make a high-cost home loan unless the lender reasonably believes the borrower will be able to make the scheduled payments. A lender cannot finance certain points and fees in making a high-cost home loan. The act prohibits a lender from charging certain points and fees if the proceeds of the high-cost home loan are used to refinance an existing high-cost home loan from the same lender. The proceeds from a high-cost home loan cannot be paid to a contractor under a home improvement contract by the lender except under certain conditions.

The failure of a lender to abide by this act shall be considered an unlawful merchandising practice. The act applies to persons who in bad faith attempt to avoid application of the provisions. The Attorney General or any party to a high-cost home loan can enforce the provisions of this act.

This act applies to all loans made or entered into after August 28, 2002.
JIM ERTLE